The deputy governor of the Bank of England recently urged the Bank of England to align its stablecoin regulations with those of the United States. In light of the US’s rapid regulatory expansion, the UK has followed suit, with the Bank of England publishing a proposal that will soften its stance on stablecoin regulation. On Monday, the Bank of England (BoE) published its “Proposed Regulatory Regime for Sterling-Denominated Systemic Stablecoins” consultation paper, which proposes that issuers of widely used stablecoins be allowed to invest up to 60% of assets backing them in government debt. Bank of England’s Proposals Apply Only to “Systemic” Stablecoins On November 10, the Bank of England published a consultation paper detailing its proposed regulatory framework for sterling-denominated systemic stablecoins. The proposal is a noteworthy step in the UK’s preparation for a future in which digital money may be readily used for payments, and which offers valuable choice to the British people. According to a press release by the Bank of England, the proposals contained in the consultation paper were developed based on the feedback it received to its November 2023 Discussion Paper . The BoE stated in its press release that it would consider the feedback received on the newly published Consultation Pape r before finalising its rules regarding stablecoin regulation in 2026. The proposals reflect the BoE’s role in maintaining public trust in money as innovation in the payment sector grows. In its Consultation Paper, the BoE sets out a robust regime aligned with the wider National Payments Vision and the Payments Vision Delivery Committee’s strategy to modernise UK retail payments. The BoE’s regulatory proposals do not extend to stablecoins used as assets for non-systemic purposes such as the buying and selling of cryptoassets. The regulation of stablecoin for non-systemic purposes will fall under the purview of the Financial Conduct Authority (FCA). According to the BoE, if stablecoins are deemed systemic by HM Treasury, they will transition into the BoE’s framework, and will be jointly supervised by the Bank and the FCA. In such circumstances, the BoE will oversee financial stability risks, while the FCA will continue to supervise conduct and consumer safety. The BoE and the FCA will reportedly publish a joint approach document in 2026, outlining how the rules apply in practice and guiding transitions between frameworks. Proposals Detailed in the Consultation Paper The Consultation Paper discusses proposals relating to backing assets and holding limits of sterling-backed stablecoins. In response to the feedback received on its 2023 Discussion Paper, the BoE detailed in its Consultation Paper that systemic stablecoin issuers may be allowed to hold up to 60% of backing assets in short-term UK government debt. The BoE stated that, for the remaining 40%, it will, as it previously proposed, furnish issuers with unremunerated accounts at the BoE to ensure robust redemption and public confidence. The proposals further specify that issuers deemed systemic at launch, or those transitioning from the FCA framework, may hold up to 95% of backing assets in short-term UK government debt to support their viability in the early stages of growth. The BoE also put forward a new proposal under which it is considering central bank liquidity arrangements to support systemic stablecoin issues during times of pressure or stress. The BoE stated that under its proposals, financial stability would be reinforced by providing a “backstop should systemic issuers be unable to monetise their backing assets in private markets”. The BoE’s Consultation Paper also discusses holding limits for stablecoins. The BoE proposed temporary holding limits of £20,000 per coin for individuals and £10 million for businesses in an effort to safeguard continued access to credit systems as the financial system adapts to new forms of digital money. In the press release, Sarah Breeden, Deputy Governor for Financial Stability at the BoE, said: “Today’s proposals mark a pivotal step towards implementing the UK’s stablecoin regime next year. Our objective remains to support innovation and build trust in this emerging form of money. We’ve listened carefully to feedback and amended our proposals for achieving this, including on how stablecoin issuers interact with the Bank of England. These proposals are fit for a future where stablecoins play a meaningful role in payments, giving the industry the clarity it needs to plan with confidence.” Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
